Zhou underscored the importance of security and abuse prevention in the development of e-CNY. He highlighted that cryptocurrencies have inadvertently facilitated illicit activities such as money laundering, arms trading in military conflicts, and fentanyl-related drug trades due to decreasing technology costs.
In 2022, the People’s Bank of China (PBOC) introduced an e-CNY pilot application as part of its ongoing efforts to promote and test the digital currency. The two-tier system of e-CNY encourages dynamic evolution through competition between the PBOC at the first level and commercial institutions at the second level.
The former governor also noted that cross-border transactions are a significant area of exploration for CBDCs. This involves a complex interplay of technology, systems, and policy orientation. In this regard, Hong Kong is currently in the second phase of technical testing to integrate e-CNY into its main local payment system.
This expansion and testing signify China’s steady progress in CBDC development and its intent to enhance security measures in digital currency transactions.
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